High Level Patent Reform

GUEST POST by Ken Salazar, WilmerHale Partner & Former US Secretary of the Interior and Quentin Palfrey, WilmerHale Senior Counsel and Former Senior Advisor for Jobs & Competitiveness in the White House Office of Science & Technology Policy

Patent politics have not always been front page news. Last year, the hilarious faux newspaper The Onion quipped that “Expansive Obama State Of The Union Speech To Touch On Patent Law, Entomology, The Films Of Robert Altman”.

While still not exactly sexy, patent policy has steadily emerged as a major economic policy issue on the national stage over the past few years. After nearly a decade of debate, Congress passed the America Invents Act in in 2011 – a major piece of reform legislation that was also notable for the bipartisan nature of its backers. In addition to President Obama and Senator Patrick Leahy (D-VT), America Invents benefited greatly from the support of a number of influential Republicans. At a time when entrenched partisan divisions have made meaningful legislative reforms nearly unthinkable in most areas, patent policy stands as a notable and nearly unique exception.

With the ink barely dry on the America Invents Act, President Obama remarked that “[o]ur efforts at patent reform are only about halfway to where we need to go.” Obama twice followed this statement up by issuing a series of executive actions and legislative recommendations in June 2013 and February 2014. While it is doubtful that the President was inspired by The Onion’s coverage, President Obama did indeed use the occasion of his 2014 State of the Union speech to call on Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.” Meanwhile, the House of Representatives passed a patent litigation reform bill at breakneck speed in December 2013, and the Senate has taken up a parallel measure.

Whatever the merits of various proposals, it is clear that patent policy and politics are experiencing a dynamic renaissance that creates challenges and opportunities for companies and individuals at every level of the economy. President Obama and Congress are not alone in seeing patent reform as an important policy area. Last week, Wisconsin joined Oregon and Vermont in passing a bill touted as a measure to crack down on demand letter abuses by patent trolls. The Federal Trade Commission has launched a study of patent litigation abuses and is reportedly pursuing investigations against entities it believes have committed unfair and deceptive trade practices. Beyond implementing the America Invents Act, the U.S. Patent & Trademark Office has launched a series of initiatives that it says will improve patent quality and provide tools to help those facing litigation abuses. Not to be overlooked are important U.S. Supreme Court cases such as CLS Bank and Octane Fitness that could significantly affect the patent litigation landscape by altering the circumstances under which software patents can be granted and fees can be awarded to prevailing parties, respectively.

Last month, our firm was proud to host a roundtable featuring Vermont Attorney General William Sorrell, who has emerged as a leader in state law enforcement efforts to combat unfair and deceptive trade practices in the patent space. Along with his colleagues from across the country, AG Sorrell has investigated and sued the notorious MPHJ Technology Investments, a company that reportedly acquired a number of scanner patents for the purpose of sending thousands of demand letters to small businesses and nonprofits. MPHJ claimed to hold a patent that covers scanning a document and attaching it to an email — a function common to numerous “off the shelf” technology products — and demanding a licensing fee of $1,000 or more per worker.

The state AG’s efforts in this space highlight the complexity of the patent policy efforts in this dynamic time. To understand developments that are proceeding at a dizzying pace, it is now imperative for policymakers, innovators, and the attorneys who advise them to constantly stay abreast of issues unfolding in all three branches of the federal government, at the state level, and even internationally.

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33 thoughts on “High Level Patent Reform”

Whoaa! Did I catch that this guest post was by the former Secretary of the Department of the Interior . . . the same department that has authorized the use of snipers against law abiding citizens taking photographs of cattle. link to informationliberation.com The same Department that the governor of Nevada takes umbrage with for violating First Amendment rights. link to myfoxphoenix.com Yeah that the same Department that has called-out a small army on a lone rancher who dared to graze his cattle on a particular piece of land that his family has used that land for generations. link to latimes.com This is all this week. Yeah that’s who I think is looking out for the public’s interest . . . see what I mean about usurping First Amendment Rights. Remember this Mr. Salazar was Secretary just last year. I wonder about what WilmerHale’s record with respect to U.S. Constitutional Rights.

Oh wait . . . look at that, they are harboring a Council on Foreign Relations meeting. What! Well good ‘ol Wolfgang is showing up. Mr. Schäuble who is currently Finance Minister of Germany has suddenly resuscitated his political career after have lost great influence due to his party receiving undisclosed donations from a gun runner (sorry arms dealer). Mr. Schäuble relinquished his chairmanship of the Christian Democratic Union. Hey I guess it could happen to anyone.

Then there is Mr. Kimmitt. Oh you are gonna love this one . . . remember that little economic hiccup in 2008, well it appears that Mr. Kimmitt was a pinch hitter for Secretary of the Treasury Snow and Secretary of the Treasury Paulson as Mr. Kimmit served as the Acting Secretary of the Treasure and served as the under Secretary from 2005 until 2009. Yeah, well I think that says enough about this group. Personally, anything that this group advocates, I think I would probably be against.

Ken, Salazar just left Interior, so I don’t know whether it is fair to blame him for what is going on in Nevada.

Further, though I don’t know the whole story there, the concept that one the government can shoot a citizen for using a camera to record arguably illegal government activity is a proposition that should have us all concerned.

President Obama needs to explain this to us.

Do you know whether the Supreme Court has ever authorized the police to stop citizens from videotaping police activity on the public streets?

The government moves like molasses. It moves slow. The policies being carried out today most assuredly were in place and utilized by the most recent past Secretary of the Interior. Besides the fight with the rancher goes back to Billy Jeff’s day (President Clinton). The point is thus, these people do not advance the interests of the majority of U.S. citizens, i.e., the one’s that pay the bills. Why should be listen to them. A more poignant question is why should we not simply disregard anything that they have to opine upon due to the incredible anti-American bias.

Ken, I don’t know much the dispute about grazing rights. It seems to me that if the facts are as if you say, the farmer should have an easement by adverse possession.

We know the government is completely wrong on land patents. They just got their position handed to them by the Supreme Court in the that recent land patent case involving easements. I think that if the farmer were to take his case to the Supreme Court, he would win.

I would also think that a District Court would issue an appropriate injunction to preserve the status quo ante pending a court resolution.

The question is whether the Interior Department is resorting to the courts to enforce its claims, or is it just using force. If the latter, we should all condemn what is going on in Nevada.

And just to drive home the point that I know what I am talking about here is a nice little article about a bunch of ostensibly U.S. BIG COs keeping their money outside of the U.S. What was that I have been told about paying my taxes-oh yeah, its the patriotic thing to do. Don’t believe for one minute that this anti-troll legislation is going to do anything but hurt U.S. citizens. Look at this article and one will realize the lack of patriotism in these companies. Oh surprise Microsoft and Apple are included. http://news.yahoo.com/untaxed-u-corporate-profits-held-overseas-top-2-231036078–business.html;_ylt=AwrBEiSyhkRTh0wARiLQtDMD

Wow the states are cracking down on demand letter abuse. Again more bashing of U.S. citizens. Remember, a substantial number if not nearly all of the so-called patent trolls are U.S. citizens asserting statutory rights.

Let me explain this system and how it is nothing less than intellectual servitude. I have been assisting individual inventors for over two decades. Thus, I have a bit of experience. There has been more than once that I have had an individual come into my office and wanting to seek protection for inventions that the inventor created. One case particularly comes to mind. The inventor comes into my office with three decades of experience. He discloses nearly $60,000.00 in work. I queried him as to what he does for a living. Naturally, he works for one of the international high technology companies (BIG CO) whose trademarks and trade name are associated with being a United States company (however, those of us who know how the system works realizes that is not entirely true-it is an international company that chooses to pay taxes in the United States-for now). So I ask him how he developed the technology. He says that he was moonlighting for a start-up and agreed that in exchange for his compensation he would not only work for the company, but also assign his rights in inventions to the start-up. So I ask, what do you do during the day. He says I work for the BIG CO. I query, what do you do there. He answers, pretty much the same thing. I say to him I can’t help you. He looks perplexed. I inform him that you need a contract attorney, because you breached your BIG CO agreement when you executed the start-up agreement. He was less than happy. You see that is how this unfolds once the truth is realized.

I inform each inventor who works for a corporation, which is my client, that I do not represent the inventor. I am here to take what is in their mind and create an asset that will be owned by the inventor’s employer. I inform them that when you acquired your job you exchanged more than you time for wages, you exchanged pretty much everything you do related to work. Then the conversation goes like this:

The United States manufacturing sector has created intellectual servitude in this nation. When you graduate from college with an engineering degree, you are a free man. You own all that is in your head. However, when you acquire that first job you surrender much of what is in your head to your employer. When you go to the next job you do the same. As a result, you are prohibited from moonlighting and/or starting your own business. In this fashion, the manufacturing sector has created a monopoly on a very valuable resource-ideas. I explain the analogy to the General Mining Act of 1872 that allows manufacturers to acquire billions of dollars of raw materials a year from public lands for a couple of bucks a year. I explain to them that the best way to avoid this is to become self-employed out of college. I have actually counseled some college students on this and they have become successful. Many of these individuals would be considered trolls. In fact some have actually sued on patents they created. From the foregoing it becomes manifest the real identity of a patent troll. It is those individuals who would follow in the steps of Mr. Birdseye, or Mr. Kellogg or Mr. Goodyear and many more. You see competition is something that is quashed in the United States in order to maintain the entrenched political establishment.

Finally, let us examine the so-called public servants who advance this anti-American patent troll legislation. Are not these the same politicians who bailed out banks with hundreds of billions of our dollars instead of letting these banks fail. Remember there were over 80,000 well run banks in the United States that would have assumed the responsibility of the failed banks. Oh, those banks were too big to fail-why, because the political establishment required the PAC money from these failed institutions to maintain its power. Are these not the same politicians who allow the NSA to spy on Americans . . . I got news for ya, they are not spying to merely ensure your are not a threat to the political structure . . . they are stealing trade secrets and technology to maintain the entrenched political power structure. Even former President Clinton admonished the Federal Government for using the NSA for industrial espionage. No ladies and gentlemen this anti-troll patent legislation is nothing more that more American bashing, because we are a threat to the establishment- we vote and we can create competing companies.

One of us might make a company that hurts to profits of the existing companies and might start funding political candidates that the current political establishment finds undesirable. This become manifest with the recent supreme court ruling that allows virtually unfettered political contributions.
Now, perhaps you truly understand why this legislation is being passed. It is to further suppress U.S. citizens from asserting their rights . . . not unlike anti-Fourth Amendment legislation, anti-First Amendment legislation and anti-Second Amendment legislation etc.

“This is not a patent reform bill” Senator Maria Cantwell (D-WA) complained,
despite other democrats praising the overhaul. “This is a big
corporation patent giveaway that tramples on the right of small
inventors.”

Senator Cantwell is right. All these bills do is legalize theft. Just because they call it “reform” doesn’t mean it is. The paid puppets of banks, huge multinationals, and China continue to brain wash and bankrupt America.

They should have called these bills the America STOPS Inventing Act or ASIA, because that’s where they’re sending all our jobs. The present bill (vers 1, 2, 3, etc) is nothing less than another giveaway for huge multinationals and China and an off shoring job killing nightmare for America. Even the leading patent expert in China has stated these bills will help them steal our inventions.

Patent reform is a fraud on America. These bills will not do what they claim they will. What they will do is help large multinational corporations maintain their monopolies by robbing and destroying their small entity and startup competitors (so it will do exactly what they paid for) and with them the jobs they would have created. They have already damaged the US patent system so that property rights are teetering on lawlessness. These bills will only make it harder and more expensive for small firms to get and enforce their patents. Without patents we cant get funded. In this way large firms are able to play king of the hill and keep their small competitors from reaching the top as they have. Yet small entities create the lion’s share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” Meanwhile, the large multinationals ship more and more jobs overseas. These bills are a wholesale destroyer of US jobs.

Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors. Congress and Obama tinkering with patent law while gagging inventors is like a surgeon operating before examining the patient.

Those wishing to help fight big business giveaways and set America on a course for sustainable prosperity, not large corporation lobbied poverty, should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

If Congress is going to take up another patent law issue, it seems to me that they ought to revisit the Myriad gene patenting case. There’s a lot wrong with that SCOTUS ruling, not the least of which is that the SCOTUS shouldn’t be “legislating from the bench”. It would be helpful for Congress to revise the 101 (utility) statute to convey that HUMAN genes cannot be patented, but that bacterial genes, plant genes and fungal genes can be.

Do you think it interesting that Congress has not introduced the patchwork (as you suggest) into 101?

The thought that comes to mind is tax methods. Instead of amending 101 and including a provisio (similar to the one you are suggesting), Congress instead took care of tax methods without compromising the breadth of reach of 101. They directly left untouched the “anything under the sun” aspect of patent eligibility and for the laser surgery on tax methods instead used a different section of the statute (patentability).

Patent eligibility and patentability are two different and distinct legal concepts.

There is a(nother) lesson to be learned by how Congress acted in the AIA to preserve the wide open gate nature of 101.**

It is high time that the Court took notice of the high level of what patent reform already looked at and decided not to change – no matter how inconvenient this may be to those pushing an agenda to have the Court usurp the constitutionally designated role of Congress.

** ON the Hricik side of the blog I have provided a synopsis of another hint that Congress in the AIA was not unsettling the notion that business methods – as a category – fall into the Useful Arts. See link to patently.wpengine.com at comment 3.1.1:

I suspect I know what it means – and Ned Heller won’t like it one little bit.

Let me set the context: Stevens was slated to write a majority opinion in a patent case largely viewed to be the bookend to his career on the bench. The depth and structure of his “concurrence” is startling. But, one not so small problem. For his main thesis in his “concurrence” to hold – that business methods as a category are not a part of the Useful Arts and not patent eligible subject matter, he would have to explicitly rewrite the words of Congress. He lost his majority position on this very point.

Now we know that a major overhaul in the wake of a Supreme Court decision can receive some pretty intense scrutiny. The majority in Bilski refused to hold that as a category business methods were eliminated as eligible subject matter. Congress – fully aware of this made a gesture for saving face by creating the CBM review section – but they did not want to disturb the holding that business methods as a category were patent eligible. Had they not included the section that explicitly said that they were leaving alone the existing meaning of patent eligibility for business methods as a category, they knew that a later court may take their action too far and claim that Congress was trying to eradicate business methods as a patent eligible item.

Section (e) cements in place the defeat of Stevens and the anti-business method jihad as decided in Bilski. By explicitly stating that subject eligibility is to be left at the pre-AIA, post-Bilski understanding, the fact that a post grant review aimed at business methods could not be used by a later Court to pull a reverse-Stevens. Section (e) is an insurance against judicial activism.

Stevens opinion in Bilski largely had it correct. First it noted that the claims in Bilski were not abstract under any of the Supreme Court’s prior decisions. Second it noted that even though the majority suggested that a process could be any series of steps, that statement itself is inconsistent with prior Supreme Court decisions for example Flook, and is internally consistent with its observation that the MOT is an important clue. Finally it noted that the objective of the initial patent statutes passed in 1790 in 1793 where to codify what the framers then understood to be patents on the useful arts. However Stevens did not seem to is connect the dots in that the definition of the initial patent statutes of “new and useful” Art, machine, manufacture or composition of matter was intended to define in the statute what Congress then understood to be the useful arts. That there is possibly something else not listed in the four categories they could be within the useful arts is an interesting speculation, but the better conclusion would be that if something new were to come along that was useful, the better approach to determining whether it was eligible would be to determine whether it could be patentable as a machine, manufacture or composition or process that related to one of these.

Congress in 1790 in 1793 could not have intended to interpret “useful arts” as anything that was useful. This much is self-evident from the Acts of 1790 in 1793. Thus whether a business method is within the useful arts must be measured against these initial statutes.

A business method is neither a machine, a manufacturer, or composition of matter, nor is it a process that involves any of these. Therefore it cannot be within the useful arts, even though it might be useful in some abstract sense.

anon, then let me put it to you this way. The majority Bilski opinion is all but incomprehensible, announcing propositions of law that are so far afield from the intent of Congress as to be far-fetched. Congress never intended that process be any series of steps that are useful. That essentially is a interpretation that reads out of the Constitution the limitation that patents are for the “useful arts.” As Stevens correctly noted, no one at the time of the Constitution or of the initial drafting of the patent acts had any question as to what the useful arts were, and simply enacted the patent statutes of 1790 in 1793 placing into them there interpretation of useful arts. The term “process”was not even mentioned, but “art” was. The only reasonable interpretation of that term in the context of those earlier patent acts was to be consistent with the overall texture of the statutes such that an art had the be a process for manipulating machines, manufacturer process or compositions. Nothing else makes sense.

At the time of the drafting the first patent acts, no one would have thought that one could patent a business method for the reasons stated in Stevens opinion. There were serious debates in the Continental Congress about monopolizing trade. They would never have drafted a constitutional provision, let alone an act that had the possibility of allowing the government to grant patents on trade. That was an anathema to the founding fathers, because it was a cause for the Revolutionary war. See the Boston tea party.

Bilski represents a complete reversal of Supreme Court jurisprudence on patentable subject matter from the very first cases in the 1850s until that case, unless it is construed to be limited to mathematical algorithms that were deemed in Benson and Flook to be like laws of nature, excluded because they are fundamental and not new.

anon, if there is one case that will not long stand without extensive revision or clarification it is Bilski. It simply is incomprehensible and the Supreme Court was mocking the advocates in oral argument when they pointed out that the Federal Circuit seemed hopelessly confused. How could that be if Bilski were so clear?

I think the majority of the court will recognize that the result in Bilski needs to be explained, and hopefully by identifying exactly what was the statutory problem with the claims. As I said before, the court has been identify the statutory basis the exclusion of laws of nature and products of nature: they are not new even though newly discovered. Ditto math.

But a principle can express an otherwise eligible idea that when applied is eligible. This, as Stevens explained, is a problem under 112, not 101. To Stevens, the Bilski claims did not have a 112 problem, therefore they were not abstract within the meaning of Benson and Flook. So that leaves open the question of just what the statutory basis for the plurality opinion was?

So, did MPHJ hold the patent that covers scanning a document and attaching it to an email?

Or did no one invent that? Did it just fall out of the either as a natural law? ‘Cause I sure remember having to go through a tortuous process of having to UU encode things before “attaching” them to emails where that process didn’t attach them so much as convert them to text and include them in the body of the email….and on the reception end, the email had to be UU decoded…. and I think you had to manually copy the uu encoded text out of the email and paste in into the decoder…

so…. you know….maybe dial back on the implied eye rolling and consider whether someone might be due a royalty check of some sort….

By the way, when you use childish name calling here, you need to be more specific. If you use “Troll” here, people might think you mean someone who expects to be paid for a license for their technology. I’m pretty sure you didn’t mean to characterized my post as doing that…

In addition to President Obama and Senator Patrick Leahy (D-VT), America Invents benefited greatly from the support of a number of influential Republicans. At a time when entrenched partisan divisions have made meaningful legislative reforms nearly unthinkable in most areas, patent policy stands as a notable and nearly unique exception.

In large part, this is because the USPTO is cranking out more junk at a faster rate than ever before in the history of the country, more junk patents are pending now than ever before, and (still waiting for the March numbers) patent litigation rates are also at record high or near-record high levels with non-producing “patent monetizers” sueing broader swaths of the public with junk that was, in many cases, “innovated” by bottom-feeding patent lawyers for the sole purpose of creating a windfall.

Prometheus was a huge wake-up call for everybody and it led various invested parties to respond in ways that showed just how desperate they were to further expand the patent system into areas which the patent system is plainly not designed to protect or promote. This was a case, you’ll recall, where the patentee asserted, upon direct questioning in court, that infringement required only (i) collecting data using an old method, and (ii) thinking about that data. And yet certain self-styled “expert” pundits (Gene Quinn and Kevin Noonan) stood firmly on the patentee’s side. Other “experts” simply refused to acknowledge the incontestable, disturbing facts of the case and chose instead to wring their hands over the oh-so-terrible consequences of tanking the patent as ineligible.

Of course, we see now what those “terrible” consequences were: a PTO that is still cranking out junk faster than ever, patent trolls asserting claims whose patentability hinges on the recitation of information content (devoid of new technology), and a stock market that is (nobody could have predicted!) completely oblivious to these allegedly biz-lethal patent decisions.

There’s going to be much more to come in the near future. How do we know that? We know that because the junk that is being granted today makes the “method of entertaining your cat with a laser pointer” patent look like something Einstein might have invented.

The public simply isn’t going to stand for the endless attempts to squelch information flow with patents which contribute nothing but squelch. The thin thread upon which the wealthy, entitled supporters of such junk hang their fantasies is unraveling before their eyes, hence their hysterical shrieking approaches a fever pitch once again. Will Alice be the final straw? Certainly it will be for Alice. And we’re looking at one very sad camel.

Keep up the great work, Dennis and Jason. You had a part in this change.

MM, fully agree. But the PTO has a problem in a Federal Circuit that has been wrong on the law and policy on significant issues such as 101, functional claiming and a lot more. Established to “strengthen” the patent system, it overshot the mark. Because it has a monopoly on patent law unless closely supervised by the Supreme Court, serious mistakes take a long time to be reversed. (The PTO shares some of the blame by not seeking cert. when the Federal Circuit has overrule precedent of long standing such as it did in Swinehart and Donaldson.)

Something needs to be done to fix this situation. One quick fix is to make all panel decisions non binding, where the only binding precedent would be delivered by an en banc court. This would allow for a more fluid development of the law.

The EPO operates in this fashion. No board decision is binding, but, over time with a sufficient number of case, a consensus is formed.

In this way, hopefully, better decisions will be rendered on particular facts and a rule of law can be developed by experience.

anon, you totally misunderstand why the Federal Circuit was formed. The law have been organically developing in United States through cases and controversies litigated in the courts for 200 years when the Federal Circuit was formed. The idea the Federal Circuit generally was to strengthen patent law against a perceived weakening caused by recent many of the circuits finding very few patents valid, holding many of them if not most of them invalid for obviousness. It was hoped that the CCPA would be more patent friendly. You can imagine that the bar would not have urged the formation of the Federal Circuit were it perceived that the CCPA had a lower standard of patentability than the other circuit courts.